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10 Reasons to Buy a Software Licensing &

10 Reasons to Buy a Software Licensing &
Entitlement Management Solution

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10 Reasons to Buy a Software Licensing &

  1. 1. WHITEPAPER 10 Reasons to Buy a Software Licensing & Entitlement Management Solution by Cris Wendt Principal Strategy Consultant, Flexera Software
  2. 2. Flexera Software: FlexNet Producer Suite White Paper Series2 Introduction The ROI and benefits of buying a commercial off-the-shelf (COTS) Licensing and Entitlement Management System versus building one in-house will vary from customer to customer, based upon business needs and market conditions. Historically, many of our hundreds of customers attempted to build their own systems, when at some point they realized that it was a losing proposition. The in-house solution was insufficiently flexible and scalable, and required too many resources that could be applied in other areas of core-competency. Ultimately, they decided that a COTS solution was best. While the value proposition and exact ROI for buying a COTS solution will differ for each customer, some of the areas below were used to develop the business case to buy a COTS solution rather than build one or, to abandon an existing solution for one that was commercially available: 1. Future-Proofing for Market Advantage: Commercial solutions will ALWAYS have more functionality, more associated best practices, and more industry case studies, allowing you to design a solution that will meet your needs today and into the future. This provides product agility which means the capability to proactively or reactively change product packaging, license models, and pricing to meet market conditions. Companies most challenged by the need to offer new license models, and consequently who build competitive differentiation with licensing and pricing models rely on COTS offerings. This includes market segments that have traditionally had small markets, high-priced software, and a wide portfolio of products, including: Electronic Design (Magma Design Automation), Mechanical Design (AutoDesk), Software Development (Borland), and Oil & Gas Exploration Halliburton). In the past 6 – 12 months, enterprise software companies (ERP, CRM, storage management, etc.) are beginning to feel some of the market pressures that had traditionally been limited to the solution vertical segments. As markets become more saturated, as virtualization and SaaS are emerging, and with compliance becoming more critical, even enterprise software companies are looking at new ways to “future proof” their business. Benefit Characterization: Increased revenue and/or decreased discounts from 2 – 10 percent can occur with improved license models, product packaging, improved compliance, and more rapid deployment of new products to market. 2. Faster Time-to-Benefit: Commercial solutions are typically ready-to-go, and have many associated best-practices and implementation case studies for a variety of processes, license models, and customer-facing facilities associated with licensing and entitlement management. The deployment of a COTS solution doesn’t suffer from endless internal cycles to define and refine requirements for systems and processes most companies don’t fully understand. Companies such as Avocent (Data Center Software), Rosetta Stone (Language Learning) and Tableau (Data visualization software) have realized these benefits. Benefit Characterization: Reduction in implementation from 6 – 12 months for an entire IT or product development team is not uncommon. Secondary benefits can be the release of a new product dependent upon the availability of a new license or entitlement management system. 3. Solution Tuned to the Unique Needs of the Software Business: Customers who internally develop systems tend to base their entitlement management solution around a classic ERP implementation. ERP systems are effective for managing finances and for facilitating the development of physical entities, but are usually not built to support the unique needs of the software or intelligent device markets. On the other hand, COTS licensing and entitlement management systems provide effective support for the “product lifecycle” – the morphing of software products over time due to upgrades, updates, moves, transfers, end-of-life, M&A, etc. Customers with internally-developed systems tend to lose track of their customer entitlements over the lifecycle of the
  3. 3. 10 Reasons for a COTS Licensing & Entitlement Management Solution 3Flexera Software: FlexNet Producer Suite White Paper Series product, resulting in lost renewal or upgrade revenue, manual processes, and ultimately, customer dissatisfaction. This was one of the driving reasons that led to Serena Software choosing a COTS solution. Benefit Characterization: Over time, companies can spend from 1-2 percent of total revenues on manual processes associated with improperly working systems. In addition, maintenance renewal rates can be as low as 55-60 percent with poor visibility into customer entitlements, as opposed to a more typical 85-90 percent renewal rate. 4. Core Competency Focus for Internal Resources: Companies don’t want to use their best product and IT development resources investing in the development of licensing and entitlement management solutions. Companies want to use their top talent to focus on the development of market-leading products in areas of core competency, and not to innovate in licensing or entitlement management. Benefit Characterization: The benefit is more difficult to quantify, but is typically related to delays in new product releases from 6 – 12 months as critical resources can’t be applied to a new product development. 5. Business Scalability / Accelerated Benefits for M&A Activity: Companies that buy COTS solutions tend to standardize on that solution across their range of product offerings and business processes, lowering operational and development costs via “reusable” and standard components and eliminating manual processes. Companies that build solutions tend to continually expand their licensing and entitlement management solution as they acquire new companies, never standardizing on a single approach, as each approach is tuned to a particular software title. Costs become excessive through multiple systems and extensive manual process across several organizations. More importantly, the lack of a standard license and entitlement management platform limits the capacity for companies to create meaningful “solutions” across companies that are acquired, and increases the probability that financial numbers are missed in a particular financial period due to inefficient operational processes. Companies such as IBM and Synopsys have created standard entitlement management and license platforms that form the basis for ongoing integration of new companies. Benefit Characterization: Over time, companies can spend from 1-2 percent of total revenues on manual processes associated with improperly working systems (also described above) In addition, a company’s market position can be eroded if they cannot assimilate acquired products into solutions or bundles, leading to an additional 10-15 percent discount for some products. 6. Lifecycle Productivity of the Solution: Over time, resources once applied to the development of a homegrown system tend to move on to other projects, and it becomes increasingly difficult to find resources to manage changes to a licensing and entitlement management solution that are required to remain competitive in the market. As a result, solutions cannot grow to meet the needs of an evolving market, typically leading to higher internal support costs, and possibly affecting the product side with increased discounts and erosion of market position as companies can’t easily adjust to what the market needs. CA recently chose to purchase a COTS solution as their internal systems reached a point where business scalability became a major issue. Benefit Characterization: Over time, companies can spend from 1-2 percent of total revenues on manual processes associated with improperly working systems (also described above). In addition, unexpected enhancements to existing systems may need to be delayed. 7. Customer Satisfaction: Commercial facilities have a breadth of usage reporting and compliance management facilities that bring value to customers in the form of more effective asset management, chargeback, workflow analysis, and the capability to control access to users on an as-needed basis. These facilities are rarely, if ever available with an internally developed system. Companies such as Halliburton, Synopsys, and EMC use the breadth of facilities in licensing to provide customers with more comprehensive tools to help manage their budgeting and usage. COTS solutions also have out-of-the-box customer-facing portals to enable 24 x 7 self-service to perform a number of administrative and compliance tasks. Benefit Characterization: It’s difficult to track the impact of a poor customer experience to revenue. But “making it easy for my customer to do business with my” is a phrase we hear often as a mandate from the executive team, clearly indicating that there is an important link between customer satisfaction and overall revenue. 8. Increased Revenue from Enterprise Agreements: Many of the usage reporting facilities enable software publishers to tune enterprise-level agreements for their largest customers based upon a mutually agreed usage and pricing formula (typically tuned to the need of each customer). It’s not uncommon for many software publishers to obtain 50 percent or more of their revenue from a handful of accounts who have special, non-standard enterprise agreements. The inability to gather accurate usage information often results in software publishers missing the opportunity to gather upside revenue that is built into the agreement because there is a lack of factual information. More importantly, the availability of these facilities enable software producers such as Cadence Design Systems to pro-actively construct enterprise-level agreements that make it easier for their largest customers to consume large amounts of software, thus creating a competitive advantage with their largest customers. Benefit Characterization: It’s not unusual for some companies to obtain an increase 2-5 percent of overall revenue by constructing more effective agreements with their large companies.
  4. 4. 10 Reasons for a COTS Licensing & Entitlement Management Solution Flexera Software: FlexNet Producer Suite White Paper Series4 9. Industry & Best Practice Expertise: The services organizations of COTS entitlement and license management companies have extensive industry experience with many customers in different markets (with many different business processes and back-office systems) and often understand what license and pricing models are more effective in different customer segments, and, how to most efficiently deploy those models in an operationally efficient way. These organizations can provide valuable input on a variety of licensing and entitlement management best practices in the areas of maintenance, product pricing, product structure and packaging optimization, product lifecycle management, channel models, business processes and high-availability systems that tend to drain companies of valuable resources because they all tend to fall into a few common traps. Companies such as Novell, CA, EMC, Autodesk, Siemens and others have relied on expert advice to design and tune their solutions. Possible Benefit: The availability of services for a COTS solution is part and parcel of all the benefits listed above, including the characterization of an individual business benefits profile. 10. Risk Reduction: Ultimately, there is a large investment that is going to be made over time in an entitlement and license management system. This investment affects all aspects of the organization and the capability to “get it right” across so many stakeholders is difficult and not typically within the realm of most companies. Most COTS companies, such as Flexera Software have successful records of achieving results. Why not partner with a proven partner? Possible Benefit: The successful deployment of your project. So, think you want to build it yourself? Think again! About Flexera Software Flexera Software is the leading provider of strategic solutions for Application Usage Management; solutions delivering continuous compliance, optimized usage and maximized value to application producers and their customers. Flexera Software is trusted by more than 80,000 customers that depend on our comprehensive solutions- from installation and licensing, entitlement and compliance management to application readiness and enterprise license optimization - to strategically manage application usage and achieve breakthrough results realized only through the systems-level approach we provide. Flexera Software is a privately-held company and an investment of private equity firm Thoma Bravo, LLC. For more information, please go to: www.flexerasoftware.com For more on software licensing and entitlement management trends, visit our blog at: http://blogs.flexerasoftware.com/ecm/
  5. 5. © 2011 Flexera Software, Inc. and/or InstallShield Co. Inc. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners. ECM_WP_BuildVsBuy_June11 Flexera Software, Inc. 1000 East Woodfield Road, Suite 400 Schaumburg, IL 60173 USA Schaumburg (Global Headquarters): +1 800-809-5659 United Kingdom (Europe, Middle East Headquarters): +44 870-871-1111 +44 870-873-6300 Japan (Asia, Pacific Headquarters): +81 3-4360-8291 For more office locations visit: www.flexerasoftware.com

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